Buren CHINA

China

Jan Holthuis and Li Jiao Buren

Litigation • cases concerning the general public; and • cases having other major potential social impact. 1 Court system What is the structure of the civil court system? Similar to the jury, a people’s juror’s main responsibility in the bench is to conduct fact finding in the trial. What is different is that the peo- In China, the people’s courts are judicial organs exercising judicial ple’s jurors enjoy the same rights as regular judges after assuming power on behalf of the state. The civil court system is, in general, com- their posts and sit in the bench with the regular judges. People’s jurors prised of Supreme People’s Court, local people’s courts and specialised are selected from citizens who are non-legal professionals with cer- people’s courts at various levels. The local people’s courts are divided tain requirements in age, education and historical record of conduct. into three levels, namely the basic people’s court, the intermediate Because there is a list of eligible people’s jurors already in place in every people’s court and the Higher People’s Court. In parallel with the local people’s court, the selection process for each case will be conducted by people’s courts system, there are specialised people’s courts set up for computer on a random basis. Further, for special cases for which peo- the trial of specialised cases, which currently include military courts, ple’s jurors with specific professional knowledge is required, the peo- railway courts, maritime courts, forestry courts, agricultural reclama- ple’s court may randomly select the jurors from people’s jurors with the tion courts, financial courts, intellectual property courts and internet required professional knowledge. courts.

China practises a system of courts characterised by ‘four levels and 3 Limitation issues two instances of trials’. ‘Four levels’ refers to the four levels of courts in hierarchy as introduced above, and ‘two instances of trial’ means that What are the time limits for bringing civil claims? a civil case should be finally decided after two trials, which, however, is According to the General Rules of Civil Law effective as of 1 October subject to retrial if there is error in the judgment. 2017, the ordinary limitation period for civil claims is extended from The subject matter, nature or size of the claim will decide which two years to three years; although special rules, either shorter or longer level of court such claim shall be brought to for the first instance trial. than the said three years, will apply to certain types of disputes. For example, an intermediate people’s court shall have jurisdiction as a The limitation periods for some specific types of cases are set out court of the first instance over the following types of civil cases: by other laws as follows: • major cases involving foreign parties; • claims for product liability: two years; and • cases with significant impact in the areas over which the courts • claims for disputes arising from an international contract for the exercise jurisdiction; and sales of goods or a contract for the import and export of technol- • cases determined by the Supreme People’s Court to come under ogy: four years. the jurisdiction of the intermediate people’s courts. The above limitation periods shall start running from the date when A Higher People’s Court shall have jurisdiction as a court of the first the claimant knows or should have known the facts giving rise to his instance over civil cases with significant impact in the areas over which or her claim and who the accused is. However, in any event, if more they exercise jurisdiction. than 20 years have passed since the date of the occurrence of facts giv- The Supreme People’s Court shall have jurisdiction as the court of ing rise to the claim, the court shall not offer any protection. However, the first instance over the following types of civil cases: there is an exception in product liability claims. The right to claim com- • cases with significant impact on the whole country; and pensation for damage caused because of defects of products shall be • cases that the Supreme People’s Court deems it should try by itself. void 10 years after the products are delivered to the first consumers,

unless the product’s expressly-stated warranty is longer. 2 Judges and juries The law provides rules to suspend the limitation period in case What is the role of the judge and the jury in civil proceedings? that within the final six months of the limitation period, the rights to ‘demand’ cannot be exercised because of any of the statutory obstacles: In China, an inquisitorial system is adopted in the judicial system • force majeure; whereby the judges take dominant roles in the trial and are actively • the person who has no or limited capacity for civil conduct has no involved in fact finding by questioning the parties, advocates of the par- statutory agent, or his or her statutory agent dies or loses the capac- ties and witnesses. This is opposed to the adversarial system adopted ity for civil conduct or the power of agency; by most common law countries where the fact-finding process is con- • neither a successor nor a legacy caretaker has been determined trolled by the parties and the judge or jury remains neutral and passive after the commencement of succession; throughout the proceeding. • the obligee is controlled by the obligor or other persons; and Besides, a jury is not provided under the judicial system of China, • other obstacles result in the failure of the obligee to exercise the and the bench of a case plays both the roles of fact finding and law appli- right of claim. cation. Generally, if a collegiate bench is established to adjudicate a civil claim, it generally consists of purely professional judges. However, The limitation period will be resumed after the causes of such suspen- for certain claims as follows, people’s jurors may be appointed to the sion are eliminated. collegiate bench to participate in the hearing: In addition to suspension, the limitation period can be inter- • cases involving group interest; rupted according to law. The limitation period is interrupted if legal • cases involving public interest; www.gettingthedealthrough.com 1 CHINA Buren proceedings are instituted or if a party demands or agrees to the fulfil- the statement of defence to the claimant within five days from the ment of its obligations. The limitation period commences anew from date when it receives the same; the time of interruption and the limitation period can be interrupted • evidence submission: the period for evidence submission can repeatedly. either be decided by the parties subject to the court approval, or determined by the court (15 days minimum); 4 Pre-action behaviour • counterclaims (if any): the defendant can file a counterclaim before Are there any pre-action considerations the parties should the end of the period for evidence submission; • hearing: the court shall notify the parties and other participants in take into account? the action three days prior to the hearing. During the court hearing, By law, generally, there are no mandatory pre-action requirements the procedure is generally divided into the investigation of the facts imposed before the civil proceeding can be issued, except for the fol- and the presentation of arguments; and lowing cases: • issuing judgment: if a judgment is delivered immediately after the • shareholder derivative lawsuit: the shareholder must first request hearing, the written judgment shall be served to the parties within the (board of) supervisors or the board of directors (executive 10 days. If a judgment is delivered on a fixed date, the written judg- director) to initiate the proceeding unless in case of emergency; ment shall be served to the parties immediately after the delivery. and • labour disputes: a labour dispute shall be first brought before the If there is a need for extension of time under special circumstances, an labour dispute arbitration committee for arbitration before pro- extension of time of six months may be granted subject to the approval ceeding to the court. of the president of the court. If there is a need for further extension of time, the approval of the higher-level court is required. However, there are some pre-action measures available to the party to However, the period for trial of foreign-related civil cases by courts assist in bringing an action. For example, for the purpose of the smooth shall not be subject to the above-mentioned time limits and restrictions. investigation during the proceeding, the enforceability of the judg- Enforcement of judgment: if a party refuses to perform an effective ment, and the suspension of damages caused to the party, such party judgment, the other party can apply for the court for enforcement. The is available to apply for preservation of evidence, preservation of prop- time limit to apply for enforcement of a judgment is two years com- erty and relevant injunctions to the court before the action is initiated, mencing from the last day of the time limit for execution of the judg- depending on the circumstances and in the event of emergency. ment specified in the written judgment.

5 Starting proceedings 7 Case management How are civil proceedings commenced? How and when Can the parties control the procedure and the timetable? are the parties to the proceedings notified of their The case management structure in the Chinese court system is estab- commencement? Do the courts have the capacity to handle lished from top to bottom. As mentioned in the answer to question 2, their caseload? inquisitorial procedure is adopted in the Chinese judicial system in As of 1 May 2015, the case acceptance system is reformed from a case- which the parties play a relatively minor role. filing review system into a case-filing registration system. Under the case-filing registration system, the proceeding will commence when 8 Evidence – documents the people’s court registers and files the complaint by the claimant. Is there a duty to preserve documents and other evidence The court shall decide whether to file and register the complaint by the pending trial? Must parties share relevant documents claimant on the spot or within seven days at the latest. If the complaint (including those unhelpful to their case)? is dismissed by the court, the claimant is entitled to appeal against the court’s decision to the higher court within 10 days. There is no compulsory or statutory duty for both parties to preserve If the court decides to register and file the complaint by the claim- evidence pending trial, nor will they be required to share relevant doc- ant, a notice letter of case acceptance will be served to the claimant. uments. Strategically, in civil litigation, one would benefit immensely Within five days from the acceptance of the case, the defendant will be from preserving evidence in a comprehensive manner. This is largely given notice of the claim served with a copy of the statement of claim dependent upon and is influenced through the allocation of the burden of the claimant. of proof, which often varies from case to case. Huge caseloads have been an issue for judges, especially those in the courts of big cities. However, capacity issues do not impact the 9 Evidence – privilege courts to list disputes in a timely manner, but exert great pressures on Are any documents privileged? Would advice from an in- the judges who have to work overtime to schedule hearings and ren- house lawyer (whether local or foreign) also be privileged? der decisions. Therefore, relieving the pressure on judges is one of the important topics of the judicial reform. Specifically, to ease the capac- The concept of ‘privilege’ does not exist under the law of China, be it ity issues, it is proposed that the percentages of judges be increased of advice from client-counsel relations in private practice or from in- in the courts with greater caseloads, more supporting staff be hired in house lawyers. the courts to assist the judges, improving and encouraging the use of Any statement of facts obtained during mediation or for media- diversified dispute resolutions other than civil litigation by parties, and tion purposes, which might have detrimental effects on the other making full use of the petty lawsuits procedures, summary procedures party, should not then be presented as evidence later in the litigation available for simple cases to improve the judicial efficiency, etc. proceedings.

6 Timetable 10 Evidence – pretrial What is the typical procedure and timetable for a civil claim? Do parties exchange written evidence from witnesses and experts prior to trial? A general procedure for a civil claim for the first instance shall be con- cluded within six months from the commencement of the proceeding, Upon courts’ acceptance of cases, both parties will be required to which includes the following stages: produce evidence prior to trial in support of their claims or defence, • starting proceeding: the civil proceeding starts when the complaint including written evidence from witnesses and experts. This would be by the claimant is registered and filed by the court (see question 5); achieved by severing a court notice to both parties, within which a statu- • notice to the defendant and defence: within five days from the tory period for submitting evidence would be contained. However, this acceptance of the case, the defendant will be given notice of the period could be extended by submitting an application in due course. claim served with a copy of the statement of claim of the claimant; A pre-trial meeting may be set up upon application for exchanging the defendant must file a statement of defence within 15 days from evidence. For cases that have voluminous evidence or great complex- receipt of notice of the claim; and the court shall deliver a copy of ity, courts also have discretion to set up such meetings.

2 Getting the Deal Through – Dispute Resolution 2019 Buren CHINA

11 Evidence – trial 14 Enforcement How is evidence presented at trial? Do witnesses and experts What means of enforcement are available? give oral evidence? There are a wide variety of measures to enforce a judgment, including: Evidence should be presented at the stage of ‘investigation’, which is • to distrain, freeze, transfer or sell judgment debtors’ property; conducted by courts. In principle, original copy of every piece of evi- • to withhold judgment debtors’ lawful income in a proportionate dence should be presented and cross-examined, unless these original manner; copies are unavailable for objective reasons, in which case a verified • to evict judgment debtors from the house or land so occupied or copy may be presented in lieu of the original ones. For each piece of used; or evidence, cross-examination should be directed to and centred around • to compel performance or arrange third parties to perform at the three main aspects (ie, authenticity, legality and relevance). expense of the judgment debtors, etc. It is compulsory for witnesses and experts to testify and be cross- examined at trial unless exceptions can be applied. If a pretrial meeting When court orders or judgments are disobeyed, courts have the power of evidence exchange is set up, witnesses may also testify at the meet- to order: ing. If experts are unable to attend the trial for legitimate reasons, a • punitive interests or penalty; written reply should be submitted instead. • restrain judgment debtors form crossing borders of the country; • limit high consumption; 12 Interim remedies • blacklist one on the public credit record; and • circulate facts of debts evasion on media. What interim remedies are available? The main interim remedies available for both parties in civil litigation 15 Public access proceedings would be preservation of property, behaviour, evidence Are court hearings held in public? Are court documents and an order of preliminary enforcement. available to the public? Preservation of property, once initiated successfully, will often take the form of sealing up, distaining or freezing, whereby any future trans- Hearings in civil litigation proceedings are accessible for the general fer, removal or alteration of such assets without courts’ prior approval public, except for cases where state secrets or issues of privacy are will be restrained. This preservation applies to both pre-action and involved, or otherwise stipulated under the law. post-action proceedings, which means a party may submit an applica- For divorce cases and cases concerning trade secrets, hearings may tion before or after a claim is officially brought to courts. In this regard, not be held in public if a prior application is filed by a party. preservation of property features similar characters and functions to Court documents such as judgments and orders are available to freezing injunctions. the public via an official website: http://wenshu.court.gov.cn/. Besides The aim of preservation of behaviour is to order one party to act or which, there are other websites or databases from which judgments not to act in a particular way. Preservation of behaviour would be avail- and orders can be downloaded. able before or after the commencement of the proceeding. However, Other court documents such as witness statements and pleadings currently preservation of behaviour (injunction) before the commence- are usually not open to the public. Upon due authorisation, qualified ment of the proceeding would only be possible in intellectual property Chinese lawyers may have access to these documents following rel- disputes. evant procedural steps. Taking notes or making photocopies of these A court adopting preservation measures may order the applicant to documents are allowed. provide guarantee, and where the applicant does not provide guaran- tee, the court shall rule that the application be thrown out. 16 Costs In addition, a court order may also be obtained for preserving Does the court have power to order costs? relevant evidence if there is high likelihood that the evidence would be destroyed or it would become difficult to locate its whereabouts. Generally, the court has no power to order costs except for the follow- This could be achieved by sealing up, detention, taking photographs, ing two situations: (i) when the parties have agreed in a contract that making sound recordings or visual recordings, making reproductions, the lawyer fees generated for the winning party shall be borne by the conducting authentication, forensic inspection, drawing up written losing party if any disputes related to the contract occur, the court may statements. order the lawyer fees as such agreed; or (ii) when the law explicitly pre- For claims where overdue alimony, maintenance, child support scribes that the losing party shall bear (reasonable parts but not all of) pensions, medical expenses, or employee payments are involved, or the lawyer fees of the winning party. According to the laws and relevant in other urgent matters, courts may issue a preliminary enforcement judicial interpretation, among others, the following circumstances or order. This means a preliminary payment would be made from one types of cases belong to this situation: personal injury compensation party to the other before the merit of the case is officially adjudged. cases, copyright infringement cases, trademark infringement cases, Conditions should be met before such order can be granted, consid- patent infringement cases, unfair competition cases, contract disputes ering both the applicants’ dependency on life or impacts on business in which the creditor exercises the right of revocation, and legal aid operation, and financial capacity of the party against whom the appli- cases. cation is made. In China, there is no such rule requiring a claimant to provide secu- rity for the defendant’s costs in litigation. But if the claimant applies to 13 Remedies the court for preservation of the defendant’s properties before or dur- ing the litigation, the court may order the claimant to provide certain What substantive remedies are available? security in accordance with the law. Interest is one of the most common substantive remedies available. This is particularly the case when the outcome of the judgment is of a 17 Funding arrangements monetary nature. Are ‘no win, no fee’ agreements, or other types of contingency Depending on the nature of disputes, other remedies such as dam- or conditional fee arrangements between lawyers and their ages, declarations, permanent injunctions and specific performance clients, available to parties? May parties bring proceedings may also be available. In civil litigation, remedies are mostly compensatory, with punitive using third-party funding? If so, may the third party take a damages as an exception. Examples of such exceptions focus mainly share of any proceeds of the claim? May a party to litigation on: fraudulent practice in violation of consumers’ rights and interests; share its risk with a third party? and carrying out food production activities without relevant trading In China, there is a risk agency charging method that can be chosen licences. by and between lawyers and clients. The risk agency charging method

www.gettingthedealthrough.com 3 CHINA Buren means: (i) no win, no fee; and (ii) lawyers charge on a relatively high but 30 days for the parties without presence in China) from the date on proportion of the amount awarded when they win a case, but the ceil- which the written judgment or ruling was served. ing amount shall be in no way over 30 per cent of the subject amount The second instance judgment or ruling becomes legally effec- involved in a case as specified in the risk agency contract. The risk tive immediately and shall be final. However, any party that consid- agency charging method shall not apply to the following cases: ers a legally effective judgment or ruling to be wrong may apply to the • cases of marriage or inheritance; immediate superior court or the original court for retrial. Nevertheless, • cases regarding asking for social insurance treatment or minimum the application for retrial does not mean that the enforcement of the living treatment; judgment or ruling is suspended. The court shall conduct a retrial only • cases regarding asking for payments for supporting parents or when the application for retrial by a party falls under any of the circum- children, alimonies, pensions for the disabled or families of the stances explicitly by law, for instance: (i) there is new evidence that is deceased, welfare payments, or compensations for work-related sufficient to overturn the original judgment or ruling; (ii) an error was injuries; or found in the application of the law in the original judgment or ruling; • cases regarding asking for payments for employment remunera- or (iii) the original judgment or ruling is not formed on the basis of due tions, etc. process, etc.

Third-party financing is not yet sufficiently developed in the litigation 21 Foreign judgments area, but is emerging and developing recently in the commercial arbi- What procedures exist for recognition and enforcement of tration area. foreign judgments? The right of action is a kind of procedural right, and the qualifica- tion for exercising this right is determined by the qualification con- It is not easy to enforce a foreign court judgment in China. A foreign tained in the related substantive rights and obligations or specially judgment holder can file petition and demand a competent Chinese granted by law. The right of action bears a nature of public law, and is court to enforce and recognise his or her foreign judgment, but the normally non-transferrable. However, the right of action can and shall Chinese court can only recognise and enforce the foreign judgment if: be transferred along with the transfer of the substantive rights and obli- (i) a bilateral enforcement treaty or arrangements exists between China gations concerned. and the country or region where the judgment was made; (ii) a multilat- eral convention exists that was signed by China (on 12 September 2017, 18 Insurance China signed the Hague Convention on Choice of Court Agreements Is insurance available to cover all or part of a party’s legal pending approval by the National People’s Congress.); or (iii) the coun- try where the foreign judgment was given had enforced judgments of costs? Chinese courts previously, which is the principle of reciprocity. Legal cost insurance in China is not as well developed as that in some western countries, and is currently seldom adopted in litigation. 22 Foreign proceedings But the mechanism of liability insurance for litigation property Are there any procedures for obtaining oral or documentary preservation is developing fast and is adopted more and more fre- evidence for use in civil proceedings in other jurisdictions? quently in litigation. In liability insurance for property preservation, the applicant for property preservation purchases liability insurance Obtaining evidence in China for use in foreign proceedings falls under products from an insurance company whose qualification is recognised judicial assistance as prescribed by Civil Procedural Law. It shall be by the court, and the insurance company issues a guarantee letter to conducted through the channels stipulated in the international treaties the court to undertake the liability for the loss caused by the property concluded or acceded to by China. If no treaty relations exist, it shall preservation to the defendant if the preservation proves to be wrong. be conducted through diplomatic channels. The diplomatic channel means the foreign court concerned can submit a power of attorney to a 19 Class action Chinese court through the embassy of that country in China to request May litigants with similar claims bring a form of collective the Chinese court to assist with investigation and collecting evidence in China. Except for the embassy or a consulate in China of a foreign redress? In what circumstances is this permitted? state, no foreign agency or individual may carry out an investigation or Under Civil Procedure Law, there is a concept of ‘joint action’ and of collect evidence within the territory of China. ‘representative action’. If one party or both parties consist of two or more persons, the Arbitration object of the action is the same or of the same category and the court 23 UNCITRAL Model Law considers that the case can be tried as a joint action, the case shall be tried as a joint action, subject to the consent of the parties. Is the arbitration law based on the UNCITRAL Model Law? The representative action is a kind of joint action. In representative China’s Arbitration Law is not enacted based on UNCITRAL Model action, one party consists of numerous persons and the action may be Law which, however, has a great influence on the enactment of the brought by a representative elected by such persons. The procedural former. acts of this representative shall be binding on all members of the party China’s Arbitration Law deviates from the UNCITRAL Model Law he or she represents. However, the representative’s modification or including, but not limited to, the following aspects: relinquishment of claims, or recognition of the other party’s claims or Both the court and the arbitration are entitled to rule on the validity involvement in mediation shall be subject to the consents of the parties of an arbitration agreement, and the ruling by the court shall be given he or she represents. the priority under China’s Arbitration Law. In China, collective actions mostly occur in labour disputes, espe- An ad hoc arbitration is generally not permitted and recognised cially in cases of equal pay for equal work. under China’s Arbitration Law. An exception to this is that, on 9 January 2017, the Supreme People’s Court issued the Opinion on the Provision 20 Appeal of Judicial Protection to the Development of the Free Trade Zone, On what grounds and in what circumstances can the parties article 9 of which allows two parties registered in free trade zones to appeal? Is there a right of further appeal? resolve their disputes through ad hoc arbitration, provided that the dis- pute be resolved in a specific place, under specific arbitration rules, and In general, Chinese courts follow the two instances of trial system as by specific people. prescribed by law. Normally the first instance judgment or ruling shall The arbitral tribunal or arbitration institution has no power to grant not be final. If a party disagrees with a first instance judgment or ruling the interim measures, the application of which by a party must be for- made by a local people’s court, the party shall have the right to lodge warded to a competent court through the arbitration institution for an appeal to the immediate Superior People’s Court within a certain determination under China’s Arbitration Law. period specified by law (15 days for judgment and 10 days for ruling, The scope of arbitrability is narrower under China’s Arbitration Law.

4 Getting the Deal Through – Dispute Resolution 2019 Buren CHINA

Under China’s Arbitration Law, both procedural irregularities and For a foreign resident appointed as an arbitrator in the domestic limited substantive reasons are grounds based on which a domes- arbitration institutions, the law does not specify the conditions and tic arbitral award may be set aside or refused for enforcement, while requirements. However, they must be equipped with a comparable only serious procedural irregularities are listed as grounds under the qualification as required for Chinese arbitrators. UNCITRAL Model Law on the same regard. In addition, the arbitration institution prepares the panel lists of arbitrators according to their different specialties, which ensures the 24 Arbitration agreements needs of complex arbitration. What are the formal requirements for an enforceable 27 Arbitral procedure arbitration agreement? Does the domestic law contain substantive requirements for An effective arbitration agreement shall include the following elements: the procedure to be followed? • in writing, no matter stipulated in a contract or provided in a sepa- rate agreement; Under the Arbitration Law of China, Chapter IV, titled Arbitration • the expression of the parties’ intention to submit for arbitration; Procedure, provides the rules on the following procedural matters: • the matters to be arbitrated; and • application and acceptance (conditions should be met by the par- • the arbitration commission selected by the parties. ties applying for arbitration, documents to be submitted, etc); • composition of the arbitral tribunal (number of arbitrators, In addition, an arbitration agreement shall be invalid if any of the cir- appointment and removal of arbitrators, etc); and cumstances occur: • hearing and arbitral awards (evidence rules, experts, evidence • matters agreed upon for arbitration are beyond the scope of arbi- preservation, conciliation). tration prescribed by law; • an arbitration agreement concluded by persons without or with 28 Court intervention limited capacity for civil acts; and On what grounds can the court intervene during an • one party forces the other party to sign an arbitration agreement arbitration? by means of duress. The court may intervene during arbitration under the following cir- 25 Choice of arbitrator cumstances and grounds: If the arbitration agreement and any relevant rules are silent • Ruling on the validity of the arbitration agreement: at the request of a party, the court may rule on the validity of the arbitration agree- on the matter, how many arbitrators will be appointed and ment; if both the arbitration institution and the court are requested how will they be appointed? Are there restrictions on the right by the parties to rule on the validity of the arbitration agreement, to challenge the appointment of an arbitrator? the court shall give the ruling (article 20 of the Arbitration Law). Under Chinese Arbitration Law, an arbitral tribunal may comprise • The issuance and enforcement of interim measures: when interim three arbitrators or a sole arbitrator. In practice, unless otherwise stipu- measures such as interim injunction, evidence preservation and lated by arbitration rules or agreed by the parties, three arbitrators will property preservation are applied during the arbitration, such be appointed generally. application shall be forwarded to the competent courts through the For the arbitral tribunal comprising three arbitrators, each party arbitration institution for issuance and later enforcement (articles shall select or authorise the chairman of the arbitration institution to 28 and 46 of the Arbitration Law; article 81 and 100 of the Civil appoint one arbitrator. The third arbitrator (ie, the presiding arbitrator) Procedure Law). shall be selected jointly by the parties or be nominated by the chairman • Setting aside an arbitral award: a party to the arbitration may of the arbitration institution in accordance with a joint mandate given request the competent intermediate people’s court to set aside an by the parties. arbitration award within six months after receipt of the award, if If the parties fail to appoint an arbitrator within the time limit set such party can furnish evidence to prove the existence of any of under the arbitration rules, the arbitrators will be appointed by the the circumstances listed in article 58 of the Arbitration Law (for chairman of the arbitration institution. domestic arbitral awards without foreign-related elements) or in The parties to the arbitration can apply for the withdrawal of the article 274 of the Civil Procedure Law (for domestic arbitral awards arbitrator after appointment if such arbitrator is found improper or with foreign-related elements). impartial in accordance with article 24 of the Arbitration Law. However, • Enforcement of an arbitral award: if one party fails to execute the an application for withdrawal shall be submitted prior to the first hear- arbitral award, the other party may apply to a competent court for ing with the statement of reasons. In the event that reasons for the enforcement (article 62 of Arbitration Law). withdrawal only became known after the commencement of the first • Refusing enforcement of an arbitral award: at the enforcement hearing, an application for withdrawal may also be submitted before stage of an arbitral award, a party against whom the enforce- the conclusion of the last hearing. ment is sought can request the court to refuse the enforcement of an arbitral award, if such party can furnish evidence to prove the 26 Arbitrator options existence of any of the circumstances listed in article 237 of the Civil Procedure Law (for domestic arbitral awards without foreign- What are the options when choosing an arbitrator or related elements) or in article 274 of the Civil Procedure Law (for arbitrators? domestic arbitral awards with foreign-related elements), or in The pool of candidates of each arbitration institution is composed of Article 5 of 1958 New York Convention (for foreign arbitral awards Chinese and foreign arbitrators. excluding that are seated in Hong Kong, Macao and Taiwan, which For Chinese residents who are eligible to be appointed as an arbi- are subject to different arrangements given or concluded). trator, they must be fair and honest persons who should satisfy one of the following conditions as stipulated by law: 29 Interim relief • have passed the Chinese bar exam and obtained the legal profes- Do arbitrators have powers to grant interim relief? sional qualification, and have engaged in arbitration work for eight years; Interim measures such as interim injunction, evidence preservation • have worked as a lawyer for eight full years; and property preservation are allowed prior to and during the arbitra- • have worked as judges for eight years; tion proceedings. However, the arbitrators or the arbitration institu- • are engaged in legal research or legal teaching with a senior aca- tion have no power to issue or enforce the interim measures. Prior to demic title; or the commencement of arbitration proceedings, such application for • have legal knowledge and are engaged in professional work relat- interim measures shall be directly requested by the parties from the ing to economics and trade with a senior academic title or at the court. in the place where the respondent resides, or where the prop- equivalent professional level. erty or evidence in question is located. However, during the arbitration www.gettingthedealthrough.com 5 CHINA Buren

Update and trends Enhanced judicial cooperation between Hong Kong and Mainland Kong Special Administrative Region, which provides a means for China parties to a Hong Kong-seated arbitration to seek interim measures On 18 January 2019, Hong Kong and mainland reached a milestone by from the Mainland Chinese courts, an option that was previously only signing the Arrangement on Reciprocal Recognition and Enforcement available for arbitrations seated in Mainland China. of Judgments in Civil and Commercial Matters between the Courts of the Mainland and of the Hong Kong Special Administrative Region, One-stop dispute resolution under the Belt and Road Initiative which seeks to establish a bilateral legal mechanism with greater clarity Following the Belt and Road Initiative, and to solve the rising and certainty for recognition and enforcement of judgments in civil international commercial disputes, the SPC established two China and commercial matters between the two places, and therefore reduces international Commercial Courts (CICC) on 29 June 2018, located the need for re-litigation of the same disputes in both places and offers in Shenzhen and XiAn respectively. By setting up the International better protection to the parties’ interests. Commercial Expert Committee and selecting certain international On 2 April 2019, the SPC and the Department of Justice of mediation and arbitration institutions to work alongside the CICC, the Government of Hong Kong signed the Arrangement Concerning CICC promote connectivity of litigation, mediation and arbitration, Mutual Assistance in Court-ordered Interim Measures in Aid of and will provide parties with a choice for dispute resolution methods Arbitral Proceedings by the Courts of the Mainland and of the Hong within the CICC.

proceedings, such application for interim measures may only be made • the arbitrators have demanded or accepted bribes, commit illegali- through the arbitration institution and parties to an arbitration may ties for personal gains or perverted the law in making the arbitral not directly request for such interim measures from the courts with award. very limited exceptions under the current practice, which is parties to an arbitration administered by the China International Economic For a domestic arbitral award with foreign-related elements, a court and Trade Arbitration Commission, the Shanghai International may set aside or refuse to enforce it if a party can furnish evidence to Economic and Trade Arbitration Commission, the Shenzhen Court prove that any of the following circumstances exist: of International Arbitration, the Beijing Arbitration Commission or • the parties have neither stipulated an arbitration clause in their the China Maritime Arbitration Commission may apply for interim contract nor subsequently reached a written arbitration agreement; measures directly to the International Commercial Court under the • the party against whom the application of setting aside or enforce- Supreme People’s Court during the arbitration proceedings. ment is sought was not requested to appoint an arbitrator or take part in the arbitration proceedings or the person was unable to 30 Award state his or her opinions for reasons for which he or she is not When and in what form must the award be delivered? responsible; • the composition of the arbitration tribunal or the arbitration proce- The Arbitration Law does not mandatorily set forth a time limit within dure was not in conformity with the rules of arbitration; which the award must be rendered. It leaves the relevant arbitration • matters decided in the award exceed the scope of the arbitration rules formulated by the arbitration institutions to deal with this matter. agreement or are beyond the jurisdiction of the arbitration institu- According to article 54 of Arbitration Law, an award shall be deliv- tion; or ered in writing with the following information set forth therein: • if the people’s court determines that the enforcement of the award • the claims for arbitration; would be against public interest. • the facts of the disputes; • the grounds upon which an award is given; For a foreign arbitration award, a court cannot set it aside but may • the results of the judgment; refuse to enforce it under the grounds set out in Article V of the New • the allocation of the arbitration fees; and York Convention. • the date of the award. In addition, if an arbitration has any of the following circum- stances, resulting in failure of enforcement, the court may make a rul- If the parties agree not to include in the award the facts of the dispute ing of rejecting the application for enforcement: and the grounds on which the award is based, such matters may be • the subject of rights and obligations are not clear; omitted in the award. In addition, the award shall be signed by the arbi- • the specific amount of payment is not clear or the calculation trators and sealed by the arbitration institution. The arbitrator who dis- method is not clear, resulting in the specific amount not being fig- agrees with the award has a choice to sign or not to sign on the award. ured out; • the particular thing to be delivered is not clear or cannot be deter- 31 Appeal mined; or On what grounds can an award be appealed to the court? • the standard, target and scope of performance of action are not clear. Under Chinese Arbitration Law, an award is final and binding once it is rendered, which cannot be appealed. However, a party may request the Besides which, if the arbitration award determines continuation of the intermedia people’s court where the arbitration institution is domiciled performance of the contract, but does not specify such specific contents to set aside an award under the grounds set forth by law. as the rights and obligations that are to be continued to be performed, Depending on the nature of the award, the grounds based upon the specific method of performance and the deadline, etc, resulting in which the award is set aside or refused for enforcement vary. the failure of enforcement, the court may also make a ruling of reject- For a domestic arbitral award without foreign-related elements, a ing the application for enforcement. court may rule to set aside or to refuse to enforce it if a party can furnish evidence to prove that there exists any of the following circumstances: 32 Enforcement • there is no arbitration agreement between the parties; What procedures exist for enforcement of foreign and • matters decided in the award exceed the scope of the arbitration domestic awards? agreement or are not under the jurisdiction of the arbitration institution; Domestic awards • the composition of the arbitral tribunal or the arbitration proce- If an award is not complied with, the applicant may apply to the inter- dure is contrary to the legal procedure; mediate people’s court where the respondent is domiciled or where • the evidence on which the award is based is falsified; the respondent’s property is located (or the basic-level people’s court • the other party has concealed evidence that is sufficient to affect appointed) to enforce it. the impartiality of the award; or

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If the respondent applies to the competent court to set aside the foreign-related elements are both subject to a reporting mechanism arbitral award at the same time that the applicant has applied for established by the Supreme People’s Court (SPC) in 1995. According to enforcement, the enforcement proceedings will be suspended. If the the reporting mechanism, if there is a proposed ruling by any interme- court rules to vacate the arbitral award, the enforcement proceedings diate people’s court or any specialised people’s court not to recognise will be terminated. If the court rejects the application to set aside the and enforce a foreign arbitral award or setting aside or not to enforce award, the enforcement will resume. a domestic award with foreign-related elements, such proposed ruling The time limit to apply for enforcement is two years from either shall be reported to the Higher People’s Court within its jurisdiction for the: review; if the Higher People’s Court intends to agree with the proposed • last day of the performance period specified in the arbitral award; ruling after review, it shall report the ruling to the SPC for final review. • last day of each performance period if the arbitral award requests The final ruling shall be made based on and following the review opin- performance in instalments; or ion given by the SPC. As of December 2017, the SPC has unified and • effective date of the arbitral award if the award does not specify a applied the same reporting mechanism to domestic arbitral awards period for performance. without foreign-related elements, which means that setting aside or non-enforcement of a purely domestic award shall be finally decided In the past six months of the time period available to apply for enforce- by SPC. ment, if an application for enforcement cannot be filed because of a force majeure event or other obstacles, the calculation of the time limit 33 Costs will be suspended and will resume after the suspension causes are Can a successful party recover its costs? eliminated. If the parties reach a settlement, or one party requests the perfor- According to article 9 of the Arbitration Fee Collection Measures of mance of the award or agrees to perform the award, the time limit for Arbitration Institutions, fees paid to the arbitration institution shall, in applying for enforcement will be started again. principle, be borne by the losing party. However, if a party only par- The proposed ruling of any intermediate people’s court or any tially wins, the arbitration tribunal shall determine the allocation of specialised people’s court after review not to enforce or set aside the fees based on the parties’ liabilities and the percentage of the party’s domestic arbitral award shall be reported to the Higher People’s Court success. within its jurisdiction for review; the final ruling shall be made based on The arbitration rules of an arbitration institution also involve the the opinions given by the Higher People’s Court after it has reviewed recovery of costs by a successful party. For example, article 52(2) of the the proposed ruling. 2015 Arbitration Rules of China International Economic and Trade Arbitration Commission provides that the arbitral tribunal has the Foreign awards (including awards made in Hong Kong, Macau power to decide in the arbitral award that the losing party shall com- and Taiwan) pensate the winning party for the expenses reasonably incurred by it China is a party to the Convention on the Recognition and Enforcement in pursuing the case. of Foreign Arbitral Awards (also known as the 1958 New York Convention). Alternative dispute resolution Separate arrangements with Hong Kong and Macao (which is 34 Types of ADR treated as a different jurisdiction for the purposes of arbitration) were entered into in 2000 and 2007 respectively, which both adopt the What types of ADR process are commonly used? Is a same general principles as the New York Convention (ie, Arrangement particular ADR process popular? Concerning Reciprocal Recognition Enforcement of Arbitral Awards The main ADR alternatives to civil litigation in China include nego- between the Mainland and the Hong Kong Special Administrative tiation, mediation and conciliation. Mediation is a signature element Region, and Arrangement Concerning Reciprocal Recognition in China’s amicable dispute resolution system, which has been a pre- Enforcement of Arbitral Awards between the Mainland and the Macau ferred dispute resolution throughout Chinese history and remains Special Administrative Region). widely used today. The Supreme Court has issued a judicial interpretation about the In China, judicial mediation is quite common and is frequently recognition and enforcement of arbitral awards made in Taiwan. adopted by the courts in the case management system. The non-enforcement of foreign arbitral awards and the set- ting aside or non-enforcement of domestic arbitral awards with

Jan Holthuis [email protected] Li Jiao [email protected]

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35 Requirements for ADR Miscellaneous Is there a requirement for the parties to litigation or 36 Are there any particularly interesting features of the dispute arbitration to consider ADR before or during proceedings? resolution system not addressed in any of the previous Can the court or tribunal compel the parties to participate in questions? an ADR process? Judicial mediation Parties to litigation or arbitration are not required by law to consider When a claim is filed to the court, except for bringing it to the full trial ADR before or during proceedings. of civil proceeding, the parties concerned can request the judges for The court or tribunal cannot compel the parties to participate in an judicial mediation provided that it is requested under the free will and ADR process. voluntary of the parties and the facts concerned are clear. Complex civil procedures are lessened if the dispute is solved through judicial media- tion, which is more effective. If a mediation agreement is reached by the parties, the court shall prepare a written mediation statement confirming such mediation agreement, which has the same effect and enforceability as a judgment.

8 Getting the Deal Through – Dispute Resolution 2019